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Vancouver's hot housing market continued to take its toll on British Columbia's overall affordability in Q2 2015: RBC Economics

TORONTO, Aug. 31, 2015 /CNW/ - British Columbia's housing affordability
continued to slide in lock-step with the steady rise in Vancouver home
prices in Q2 2015, according to the latest Housing Trends and Affordability Report issued today by RBC Economics.

The RBC Housing Affordability measures, which capture the province's
proportion of pre-tax household income needed to service the costs of
owning a home at market values, rose the most for B.C. among all
provinces in the second quarter of 2015. RBC's measures increased by
2.5 percentage points to 75.3 per cent for two-storey homes, by 2.1
percentage points to 71.4 per cent for bungalows, and by 0.4 percentage
points to 33.3 per cent for condos. An increase in the measure
represents a deterioration in affordability.

"Poor housing affordability at the provincial level, particularly in the
single-detached home segment, is a reflection of the extreme situation
in Vancouver," said Craig Wright, senior vice-president and chief
economist, RBC. "That said, deteriorating affordability did not pose
any issue for home resale activity in the second quarter. In fact, the
resale market was on a roll across most of the province, including:
Vancouver, Victoria, the Fraser Valley, Chilliwack and Kamloops, and we
expect B.C. home resales to rise by more than 20 per cent overall in
2015 - the highest increase in the country by far."

Hot Vancouver market continues to raise the bar for home ownership
The Vancouver-area housing market, along with the Toronto market, has
been in the spotlight so far in 2015.

"Vancouver's housing affordability readings are nearing the worst levels
ever recorded in Canada, but this is still not reining in buyer demand
at all," Wright said. "Given the current high degree of tightness in
the market, further price acceleration and affordability deterioration
are even very likely in the near term."

Strong housing demand in Vancouver outpaced supply, especially for
single-detached homes, which in turn produced some of the stronger
gains in home prices in the country. The average price of a detached
bungalow, for example, in Q2 2015 was $967,500, up close to 5 per cent
from Q1, and up more than 12 per cent from a year earlier.

Not surprisingly, this took a further toll on already poor housing
affordability in the area. RBC's affordability measure for a detached
bungalow in Q2 2015 was 88.6 per cent, up 3 percentage points from Q1.
RBC's measures rose a significant 3.7 percentage points for a standard
two-storey home to 90.6 per cent, and a comparatively more subdued at
0.5 percentage points for a condo apartment to 40.1 per cent.

RBC notes that deteriorating affordability didn't abate the surge in
Vancouver home resale activity in the second quarter, with a fifth
consecutive quarterly increase (5.6 per cent) and the sales-to-new
listings ratio (0.72) moving deep into sellers' market territory.

During Q2 2015, national affordability measures rose by 0.7 percentage
points to 43.3 per cent for bungalows and by 0.4 percentage points to
48.3 per cent for two-storey homes. The measure for condominiums
remained unchanged at 27.1 per cent.

The RBC Housing Affordability measure, which has been compiled since
1985, is based on the costs of owning a detached bungalow (a reasonable
property benchmark for the housing market in Canada) at market value.
Alternative housing types are also presented, including a standard
two-storey home and a standard condominium apartment. The higher the
reading, the more difficult it is to afford a home at market values.
For example, an affordability reading of 50 per cent means that
homeownership costs, including mortgage payments, utilities and
property taxes, would take up 50 per cent of a typical household's
monthly pre-tax income.

It is important to note that RBC's measure is designed to gauge
ownership costs associated with buying a home at present market values.
It is not a representation of the actual costs incurred by current
owners, the vast majority of whom have bought in the past at
significantly different values than those prevailing in the latest
period.

Following the plunge in oil prices in the first quarter of 2015,
Alberta's housing market settled down in the second quarter. RBC's
measures for the province fell by 0.5 percentage points for two-storey
homes, 0.1 percentage points for bungalows, and inched higher by 0.2
percentage points for condominiums.

Signs of recovery in the home resale market were apparent in the second
quarter, although resale activity remained far below levels in 2014.
RBC's measures increased by 0.8 percentage points for both bungalows
and two-storey homes, while the measure for condominiums decreased by
0.2 percentage points.

Owning a bungalow or condominium became less affordable in Q2, while
owning a two-story home became more affordable. RBC's measures rose
modestly for both bungalows and condominiums at 0.7 percentage points,
while the measure for two-storey homes fell by 0.5 percentage points.

Owning a single-detached home at market prices in the province has
become less and less affordable, while owning a condominium appears to
be within reach. RBC's measures showed further deterioration for
bungalows (rising by 1.1 percentage points) and two-storey homes (up
0.7 percentage points), while condominiums remain fairly steady (down
only 0.1 percentage points).

Housing affordability continued to improve in Quebec in Q2. RBC's
affordability measures fell in all three categories for the third
consecutive quarter and by some of the largest margins across all the
provinces. Two-storey homes fell by 1.1 percentage points, bungalows
fell by 0.9 percentage points, and condominiums decreased by 0.5
percentage points.

Softness in the housing market drove homeownership costs down in Q2.
RBC's affordability measures fell across all categories (between 0.3
and 0.7 percentage points), adding to the continuous decline registered
since late 2013.

The full RBC Housing Trends and Affordability report is available
online, as of 8:00 a.m. ET today, at rbc.com/economics/market.